There is freedom of trade and commerce in Germany. This means that basically everyone is allowed to take up a commercial activity. With a few exceptions, entrepreneurs can therefore set up their business without needing a permit or authorization. In spite of the freedom of trade, every entrepreneur is obliged to inform various authorities and institutions about starting a self-employed activity, regardless of whether this activity is carried out full-time or part-time.
Commercial Register
General
Merchants are obliged to register in the commercial register at the competent local court and to have this registration certified by a notary (§ 29 of the German Commercial Code (HGB). The commercial register provides information about all legally relevant facts that may be important for a business partner. This includes in particular:
- Company
- Name of the owner or the personally liable partners of a partnership
- Liability of the timited partner
- Share capital of the GmbH
- Granting and withdrawal of procuration
- Opening of insolvency proceedings
- Deletion of the company
In this respect, the Commercial Register enjoys public trust. This means that to a certain extent it protects legal transactions in good faith in its trust in the correctness of the entries and announcements.
Merchant Status
According to § 1 (1) HGB, every merchant who operates a commercial business (actual merchant). This is “any type of commercial enterprise, unless the nature or scope of the business does not require a business operation set up in a commercial manner” (§ 1 HGB). The term “commercial enterprise” refers to the organized unit of material and personnel resources with the help of which the owner of the business conducts a recognizably scheduled, long-term independent and not freelance, scientific or artistic offering activity with the intention of making a profit on a market.
Merchants also include companies with a certain legal form (Form-Kaufmann), for example:
- General partnership (Offene Handelsgesellschaft ) (§ 6 HGB)
- Limited partnership (Kommanditgesellschaft) (§ 6 HGB)
- Public limited company (Aktiengesellschaft) (§ 3 Abs. 1 AktG)
- Partnership limited by shares (Kommanditgesellschaft auf Aktien) (§ 278 Abs. 3, § 3 Abs. 1 AktG)
- Limited liability company (Gesellschaft mit beschränkter Haftung) (§ 13 Abs. 3 GmbHG)
- Registered cooperative (Eingetragene Genossenschaft) (§ 17 Abs. 2 Cooperatives Act (Genossenschaftsgesetz- GenG))
Companies that cannot be classified as merchants, for example small businesses, freelancers or BGB companies, can voluntarily register in the commercial register (Kann-Kaufmann).
Registration procedure
Registration and transmission of documents must be done electronically. For founders, this is done by the notary.
Trade Office (Gewerbeamt)
General
In principle, every business enterprise must be registered with the responsible trade office (mayor’s office, municipality). Exceptions to this rule are members of the liberal professions, for example lawyers, doctors, architects, tax consultants, artists, writers and self-employed persons in agriculture and forestry. The local jurisdiction of the trade office is determined by the location of the company’s registered office. When registering, the identity card or passport as well as any special permits and proofs such as trade card or concessions must be presented. The business registration also automatically informs other authorities about the commencement of business activities, for example:
- Tax office (Finanzamt)
- Chamber of Crafts (Handwerkskammer) (for skilled trades)
- Employer’s Liability Insurance Association (Berufsgenossenschaft)
- Chamber of Industry and Commerce (Industrie- und Handelskammer)
- State Statistical Office (Statistisches Landesamt)
- Commercial register (local court) (Handelsregister (Amtsgericht))
Businesses Subject to Licensing (Erlaubnispflichtige Gewerbe)
For certain trades, a special permit is required before commencing business. Depending on the activity, the permit may be subject to the following requirements being demonstrated:
- Personal reliability, for example through a police clearance certificate and an extract from the central trade register
- Material requirements, e.g. information from the list of debtors or a certificate of no objection from the tax office
- Professional requirements, for example, proof of training or studies or participation in further education
The obligation to obtain a permit may result from the German Industrial Code (GewO) or other laws, for example:
- Showcasing of human beings(§ 33a GewO)
- Operation of amusement arcades (§ 33i GewO)
- Pawnbroking trade (§ 34 GewO)
- Guarding trade (§ 34a GewO)
- Auctioneer (§ 34b GewO)
- Real estate agent, property developer, construction supervisor (§ 34c GewO)
- Financial investment brokers (§ 34f GewO)
- Travel industry (§ 55 GewO)
- Trade with vertebrates (§ 11 Animal protection law-Tierschutzgesetz)
- Debt collection agency (§10 Law on extrajudicial legal services-Gesetz über außergerichtliche Rechtsdienstleistungen(RDG))
- Cab company (§ 2 Passenger Transportation Act-Personenbeförderungsgesetz (PBefG))
- Day Care Center (§ 45 Social Security Code-Sozialgesetzbuch (SGB) VIII)
- Temporary employment (§ 1 Labour Leasing Act-Arbeitnehmerüberlassungsgesetz (AÜG))
- Arms Trade (§ 7 Weapons Act-Waffengesetz (WaffG))
Licence-Free Businesses
In the case of permit-free trades, the Trade Licensing Office merely confirms the registration and sends the confirmation to the entrepreneur, usually within three days.
Tax office
In addition, the tax office must be informed about the establishment of the company. Entrepreneurs who have already submitted a notification to the trade office do not need to take action here, as the tax office is automatically notified by the trade office.
Members of the liberal professions and artists, on the other hand, must independently notify the tax office within one month of commencing their activities. All that is required is an informal registration with the tax office in whose district their place of residence is located. Recipients of a start-up grant must also submit their business plan to the tax office.
After registration, the tax office sends the entrepreneur a “questionnaire for tax registration”. On the basis of the information in it, the tax office assigns a tax number to the business and possibly determines advance payments. It is therefore advisable to realistically estimate the turnover and profit expectations.
Employment Office
If a company wants to employ employees, mini-jobbers or trainees who are subjected to social insurance contributions, it is necessary to apply for a company number. This application can be submitted to the Business Number Service of the Federal Employment Agency in telephone or written form or by fax or e-mail.
Chamber of Commerce (for liberal professions)
There are professional chambers for various professions, which are usually organized under public law and perform tasks of professional self-administration. Some of them have compulsory membership, which is why these chambers must be notified regularly of the commencement of business activities.
For some members of the liberal professions, there are independent professional chambers (chambers of professional conduct) with which they must register. These so-called “chambered” liberal professions include:
- Architects
- Pharmacists
- Doctors
- Consulting engineers
- Notaries
- Patent attorneys
- Psychotherapists
- Lawyers
- Tax consultant
- Veterinary surgeons
- Certified Public Accountant
- Dentists
For all other freelancers such as journalists and artists there is no compulsory membership. They can simply start their activities.
Chamber of Crafts (for skilled trades)
If someone wants to start a craft business, it may be necessary to register in the register of craftsmen at the local Chamber of Crafts. This depends on whether the craft enterprise belongs to the so-called dangerous professions. These are professions in which improper practice can endanger the health or life of customers or the general public. Such occupations may only be taken up and exercised if at least one employee (the owner or an employee) has passed a corresponding master craftsman’s examination. The trades with master craftsman’s certificate are listed in Appendix A of the Crafts Code. To this belong for example:
- Road builder
- Heat, cold and sound insulators
- Scaffolding erectors
- Metal worker
- Surgical Mechanic
- Car body and vehicle manufacturers
- Precision Mechanic
- Refrigeration plant manufacturer
- Information Technician
- Automotive Technician
- Agricultural machinery mechanic
- Installer and heating engineer
- Electrical Engineer
- Electrical Engineer
- Boat- and shipbuilders
- Dental technician
Craft trades listed in Appendix B of the Crafts Code (HwO) can be practiced without special qualifications. In addition to the registration of the trade, only a notification to the Chamber of Crafts is necessary. This includes for example:
- Tank and apparatus construction
- Watchmaker
- Metal Former
- Electroplaters
- Metal and bell founders
- Cutting tool mechanic
- Gold- and silversmiths
- Model builder
- Ladies and men dressmakers
- Interior decorator
- Brewers and maltsters
- Wine cooper
- Textile cleaner
- Building cleaners
- Photographers
Employer’s Liability Insurance Association
It may also be necessary to notify the relevant Employer’s Liability Insurance Association. The employers’ liability insurance associations are the carriers of the statutory accident insurance and have the primary task of preventing accidents at work and on the way, occupational diseases and work-related health hazards by all appropriate means.
Membership in the Employer’s Liability Insurance Association (Berufsgenossenschaft) is compulsory as soon as the company employs workers. The responsible trade association should be informed within one week after the registration of the trade or the start of the self-employed activity, unless the information is automatically provided by the trade office.
Entrepreneurs who do not employ any employees are not always subject to compulsory insurance. However, voluntary insurance with the employers’ liability insurance association can be useful to insure against the consequences of occupational accidents and diseases.
Chamber of Industry and Commerce
All tradesmen and companies are by law members of the Chamber of Commerce and Industry. The only exceptions to this rule are craft enterprises, agricultural businesses and freelancers, as long as they are not entered in the commercial register. In this case, information is provided automatically by the trade office.
The membership fee for a IHK membership is the responsibility of the individual Chamber of Industry and Commerce. The fee for IHK membership consists of two components:
- For the IHK membership a fixed basic fee is due on the one hand: for small businesses, this starts between 30 € and 75 €, for companies registered in the commercial register at least between 150 € and 300 € per year.
- On the other hand, the contribution for IHK membership includes a levy depending on the performance of the company.
An exemption from membership fees is possible under the following circumstances:
- Small companies that are not registered in the commercial register and whose annual yield is less than 5,200 €.
- Existence founders – if not registered in the trade register – are exempted in the first two years from the basic contribution of the Chamber of Industry and Commerce and in the first four years from the apportionment of the IHK – the annual yield may not exceed 25,000 € as a rule.
State Statistical Office
Almost every company must meanwhile report special statistical evaluations to the statistical offices of its federal state or the federal government. This mainly concerns sales revenues and employee numbers (full and part time). The following evaluations are examples of such reports:
- Monthly and annual report for manufacturing and mining companies
- Quarterly survey of earnings
- Monthly survey in retail trade (also for multi-country enterprises)
- Monthly survey in hotels and restaurants (also for multi-country enterprises)
- Monthly survey in wholesale trade and trade intermediation (also for multi-country companies)
- Structural survey in the service sector
- Short-term statistical survey in certain service sectors
For business start-ups or small and young enterprises, there are so-called “founder exceptions” in economic statistics and in parts of environmental statistics as a result of the bureaucracy reduction law. This applies in the year of the opening of the business or also in the two following years, provided that the annual turnover does not exceed 800,000 euros. The companies are exempted from a total of eight different statistics laws, including service and trade statistics and the survey on investments and goods and services for environmental protection. Voluntary participation is of course possible.
To avoid time-consuming gathering of information, data and figures, the required data should already be available in digital form in your company: e.g. in the payroll program in your IT department. Using the online reporting procedure eSTATISTIK.core, the data requested by the statistics department can be automatically obtained and transmitted from the operational accounting system or other electronically evaluable company documents.
Insurance obligation of self-employed persons
In principle, self-employed persons are personally exempt from membership in the statutory social insurance schemes, i.e. pension, health, nursing and unemployment insurance. They are therefore free to decide whether and how they want to insure themselves, either through private insurance or by voluntarily joining the statutory social insurance schemes.
However, a few groups of self-employed persons are not exempt from the statutory pension insurance, for example:
- Craftsmen
- Midwives
- Independent teachers and educators
- Artists and publicists.
You must register with the German Pension Insurance.
Versicherungspflicht von Arbeitnehmern
Legal basic
All employees have the obligation to report and pay contributions to the employee’s health insurance company as the collecting agency. Only in the case of low paid employees (“mini-jobs”) the registration and payment of the lump-sum contribution is made to the mini-job center as a single collection point. All employees are also obliged to register and pay contributions to the statutory accident insurance.
Anyone hiring employees for the first time should inform themselves in good time about their reporting obligations under social insurance contribution law. If a notification is intentionally or grossly negligently not submitted, not submitted in time, not submitted correctly or not submitted in full, this is a violation of the regulations and can be punished by a fine. The employer is therefore legally obliged to submit the reports.
The legal basis for employer notifications is § 28a SGB IV. The purpose of the notifications is to inform the social insurance carrier of the occurrence of the obligation to insure and thus to enable it to monitor the payment of contributions and to assign paid contributions to the individual insured person.
All employees have the obligation to report and pay contributions to the employee’s health insurance company as the collecting agency. Only in the case of low paid employees (“mini-jobs”) the registration and payment of the lump-sum contribution is made to the mini-job center as a single collection point. All employees are also obliged to register and pay contributions to the statutory accident insurance.
Group of persons subject to registration
You must be logged in during the setting:
- Employees who are compulsorily insured in health, nursing care, pension and unemployment insurance (standard case)
- Employees who are exempt from health insurance because they exceed the annual income limit
- Employees who draw an old-age pension and for whom therefore the own contribution share to the pension insurance is omitted under continuation of the obligation to insure in the health, care and unemployment insurance and insofar only the employer’s contribution is to be paid
- Employees after reaching the age of 65, for whom no employee’s contribution is to be paid to unemployment insurance, otherwise the obligation to pay contributions continues to exist.
- Employees in partial retirement
- Employees who are in marginal and insurance-free employment (special rules apply here, see below)
- Students who, during their studies, are in employment that exceeds the marginal earnings threshold (compulsory pension insurance)
Addressee of the messages
The addressee of the registration is basically the responsible health insurance company as the collecting agency. (Exception: so-called mini-jobs).
For the registration it is therefore necessary that the employee submits a membership certificate to the employer right at the beginning of the employment (at the latest 2 weeks after its beginning).
If the employee does not submit a membership certificate after 2 weeks, the employer registers him with the health insurance company with which he was last insured. The employer must therefore always ask a newly hired employee with which health insurance company he was last insured. The employee is obliged to provide information!
If no health insurance existed last, the employer selects a health insurance company, whereby the employee is assigned to this insurance company. The employer must inform the employee about the selected health insurance company!
Registration deadlines
Since the relaxation of the registration deadlines, the registration must be submitted to the health insurance fund with the next subsequent payroll, but no later than six weeks after the start of employment subject to compulsory insurance (§ 6 DEÜV) and not already within two weeks of the start of employment.
The notification to the Employer’s Liability Insurance Association is made once a year; forms for this registration are available from the responsible Employer’s Liability Insurance Association.
When hiring an employee for the first time, the employer must also apply for a company number from the Employment Agency.
Form of the reporting
A certain procedure must be followed for the handling of the notification procedure. Employers are obliged, among other things, to register each individual employee and to provide evidence of the amount of contributions paid. For this purpose, employers require an eight-digit company number. If a company number has not yet been assigned, it must be applied for at the employment agency responsible for the company’s headquarters.
The reports can be submitted manually on forms from the collection point or automatically.
Automatic reporting procedure is mandatory
Since January 1, 2006, social security notifications may only be submitted by means of secure and encrypted data transmission from system-checked programs or by means of automatically generated completion aids. The earlier possible reports in paper form belong finally to the past.
If a computer program is already used in the company for reporting, it must be checked whether this program has received the “System Investigated” certificate from the ITSG. The ITSG is the information technology service center of the statutory health insurance and is solely responsible for system investigation.
Special features: Registration for marginally employed persons
The Social Code distinguishes between two types of so-called “mini-jobs”:
- low-paid employment (so-called 450-Euro-job) and
- of short-term employment
Mini-jobs are paid at a low rate if the monthly income does not exceed the maximum of 450 euros. A short-term mini-job is when the employment is limited to three months or a total of 70 working days in a calendar year.
Mini-jobs are exempt from social security contributions, which means that they do not establish their own social security cover. However, freedom from social insurance is not the same as freedom from contributions: While the 450-euro jobs are subject to compulsory health and pension insurance contributions (a flat rate of 28 % of the salary is paid by the employer), the short-term mini-jobs are free of contributions, regardless of the amount of the salary. Mini-jobs are generally not subject to contributions for nursing care and unemployment insurance. However, both types of employment are subject to tax (flat rate 2% for 450 Euro jobs and 25% for short-term jobs).
Since April 2003, the minijob center of the German Pension Insurance Knappschaft-Bahn-See has been the central registration and collection point for marginal employment. Information on the registration procedure is available on the Internet at www.minijobzentrale.de or from the Service Center of the Minijob-Zentrale on 0355 2902 70799.
The social security card is issued ex officio by the pension insurance institution for each employee without a special application. This is done when an insurance number is issued for the first time, i.e. the first time an employee takes up employment in Germany. Every employee is obliged to present the social security card to the employer at the beginning of employment. The employer is obliged to present the social security card.
Payment of contributions to accident insurance
Contributions to accident insurance are to be paid directly by the employer to the relevant trade association. Contributions are to be paid by the employer alone. To prove the wages, the employers’ liability insurance associations send out a wage statement form around the turn of the year, which must be completed by the employer within a certain period of time. The notice of contributions, which is based on the wage statement, is sent out regularly in April.